Tricky Pitch, Despite US Supreme Court Ruling, India Cannot Give Up Trade Talks
The US Supreme Court’s majority ruling against reciprocal tariffs has opened up a scenario of bewildering possibilities for India and the rest of the world. The court has struck down the exercise of powers under the International Emergency Economic Powers Act, 1977, as a case of executive overreach, holding that Congress should not have been bypassed. The world watches with bated breath on what the Trump administration might unleash next.
This ruling is a significant legal check on presidential power, but it does not mark the end of trade uncertainty. If anything, it has opened a new, more complex chapter in the ongoing saga of US trade policy.
What Comes Next?
The US has already invoked Section 122 of the Trade Act, 1974 to impose global tariffs of 15 per cent to deal with a ‘large and serious’ trade deficit. This can run only for 150 days. A review, possibly with legislative sanction, might be needed for an extension.
Treasury Secretary Scott Bessent has darkly hinted that Section 338 of the Tariff Act, 1930 might come into play. The section allows for tariffs up to 50 per cent on ‘discriminatory’ foreign imports, but it is vague in scope and about implementing agencies. The ambiguity itself is a weapon; uncertainty about what might come next can be as disruptive as the tariffs themselves.
Meanwhile, the tools being used are Section 301 of the Trade Act, 1974, and Section 232 of the Trade Expansion Act, 1962. These two have to be preceded by time-consuming investigations establishing unfair trade practices and national security concerns, respectively. They are not quick fixes, but they remain available.
So, it would be premature to assume that high tariffs are a thing of the past. What is more likely is that future options exercised by the Trump administration will be procedurally more constrained but substantively no less threatening.
The Impact on India
What is the net impact of these developments on India? As of now, they are faced with 15 per cent plus MFN tariffs on their exports. Country-specific reciprocal tariffs, 18 per cent in India’s case as per the framework agreement, have ceased to be, but sectoral tariffs on steel and aluminium globally—under Section 232—remain. It is estimated that over half of India’s exports to the US will now attract 15 per cent plus MFN tariffs.
This is not a favourable outcome, but it is also not the worst-case scenario. The 18 per cent reciprocal tariff that was part of the framework agreement is gone, but the 15 per cent global tariff plus MFN duties remains. For Indian exporters, the arithmetic has changed, but not necessarily for the better.
The Strategic Question
The big question now is: how should India deal with an incensed President Trump in its ongoing trade talks? Rescinding the admittedly one-sided interim framework deal is not an option, for three reasons.
First, in principle, there are gains to be had from a well-tailored pact with the US. Trade agreements are not zero-sum games; they can create value for both sides. India’s interests lie in securing market access, protecting sensitive sectors, and creating a predictable trading environment. These goals remain valid regardless of the tariff turbulence.
Second, it is possible to leverage the confusion arising out of the court order to arrive at favourable terms. The legal landscape has shifted. What was agreed in the framework may no longer be directly applicable. This creates room for renegotiation, for pressing India’s concerns, for seeking a better deal.
Third, a walkout can provoke a needlessly hostile response. The Trump administration has shown itself willing to retaliate against countries it perceives as阻碍 its agenda. Walking away from talks could invite punitive measures that would harm Indian exporters far more than any interim agreement.
The Reopening Clause
A clause in the February 6 joint statement, in fact, says: “In the event of any changes to the agreed upon tariffs of either country, the United States and India agree that the other country may modify its commitments.” This is a critically important provision.
The entire basis of the framework agreement was the reciprocal tariff of 18 per cent. That tariff has now been invalidated by the Supreme Court. The conditions under which India agreed to its commitments have fundamentally changed. India is therefore entitled to modify its own commitments.
This is not just a legal point; it is a negotiating opportunity. India can clear its positions on areas such as application of standards, particularly in agriculture, exercise of digital sovereignty, and the need to delink trade from geopolitical alignments—issues mentioned in the joint statement.
What India Should Seek
India should use this opportunity to address several key concerns.
First, agriculture standards. The US has long sought greater access for its agricultural products, citing sanitary and phytosanitary measures as barriers. India must ensure that any commitments in this area do not undermine domestic farmers or compromise food safety standards.
Second, digital sovereignty. The joint statement mentions digital trade. India must ensure that its ability to regulate the digital economy, protect data, and impose taxes on digital transactions is not compromised by trade agreement provisions.
Third, geopolitical delinking. The US has increasingly sought to use trade as a tool of geopolitical alignment. India must resist efforts to link trade concessions to strategic choices, such as oil purchases from Russia or defence cooperation with other powers.
The Path Forward
In other words, a deal is on; the terms should change. The framework agreement was negotiated under one set of assumptions. Those assumptions have been upended by the Supreme Court ruling. India is within its rights to seek modifications that better reflect its interests.
This does not mean walking away from the table. It means engaging more assertively, using the changed circumstances to press for a better deal. The US, facing its own uncertainty about what tariffs are legally available, may be more open to negotiation than it would otherwise be.
Conclusion: Opportunity in Confusion
The Supreme Court ruling has created confusion, but confusion can also be opportunity. For India, the opportunity is to reset trade talks on more favourable terms. The framework agreement was one-sided; the new agreement need not be.
India should not abandon the trade talks. It should use them to secure a deal that serves its interests, protects its farmers, preserves its digital sovereignty, and keeps its strategic options open. The path forward is tricky, but it is navigable.
Q&A: Unpacking the Trade Talks After the Supreme Court Ruling
Q1: What did the US Supreme Court rule regarding Trump’s tariffs?
The Supreme Court struck down the exercise of powers under the International Emergency Economic Powers Act (IEEPA), 1977, as a case of executive overreach. The court held that Congress should not have been bypassed in imposing reciprocal tariffs. This ruling invalidates the country-specific reciprocal tariffs, including the 18% tariff agreed with India under the framework agreement.
Q2: What tariffs still apply to Indian exports after the ruling?
Indian exports now face 15% global tariffs imposed under Section 122 of the Trade Act, 1974, plus most-favoured nation (MFN) duties. Sectoral tariffs on steel and aluminium under Section 232 remain in place. Over half of India’s exports to the US will attract these rates. The 18% reciprocal tariff specifically negotiated for India is no longer valid.
Q3: Why shouldn’t India walk away from the trade talks despite the one-sided framework?
Three reasons: First, a well-tailored pact with the US can still yield gains. Second, the confusion from the court ruling can be leveraged to negotiate more favourable terms. Third, walking away could provoke a hostile response from the Trump administration, potentially harming Indian exporters more than any interim agreement would.
Q4: What reopening clause exists in the February 6 joint statement?
The joint statement includes a clause stating that in the event of any changes to the agreed-upon tariffs of either country, the other country may modify its commitments. Since the 18% reciprocal tariff has been invalidated, the conditions under which India agreed have fundamentally changed, giving India the right to seek modifications.
Q5: What key issues should India press in renegotiated talks?
India should focus on three areas: agriculture standards (ensuring commitments don’t undermine domestic farmers or food safety); digital sovereignty (protecting ability to regulate the digital economy, data, and digital taxes); and geopolitical delinking (resisting efforts to link trade concessions to strategic choices like oil purchases or defence cooperation). A deal is on; the terms should change.
